Canadian Employers Try to Balance Adequacy and Cost of
SERPs

September 3, 2008 (PLANSPONSOR.com) - Findings of a
nationwide survey of Canadian plans by Buck Consultants show
that for Supplemental Employee Retirement Plans (SERPs),
sponsors' top concerns include communications, the adequacy
of benefits, and the costs of the plan.

The study, “Moving Forward – An Overview of
Supplemental Employee Retirement Plans in Canada,”
examined the two types of SERPs – the “top-up”
arrangement (based on the same formula as the registered
pension plan) and the “executive” plan (which provides
separate benefits for senior executives), according to a
Buck press release. Employee understanding and
communications issues topped the list of concerns for 69%
of sponsors of both types of SERPs, while adequacy of
benefits was cited by 67% of top-up plan sponsors and 62%
of executive plan sponsors. Cost containment was a major
issue for two-thirds of sponsors.

The survey also found that, while there is no
requirement to fund a SERP, 32% of the plans are funded
through a Retirement Compensation Arrangement. One reason
for this is that key decision makers in the company are
often those who have the most significant benefits in the
SERP and bear the highest risk if the plan is unfunded,
Buck said.

Forty-four percent of plans provide inflation
increases for SERP benefits, and just over half of those
provide inflation protection on an ad hoc basis.

Buck found that a significant number of plan
sponsors – close to 80% – have a SERP in place for all
salaried non-union employees, not just senior management.
“As the average wage steadily climbs, more and more
employees are finding their pensions restricted by the
Income Tax Act limits under the registered pension plan,”
said Charlene Moriarty, consulting actuary in Buck’s
Toronto office, in the press release. “Employers are
therefore finding it increasingly necessary to offer
supplemental pension arrangements not only for their
senior executives, but for their middle management
employees as well.”

The Buck Consultants survey of more than 150
employers was conducted in the third quarter of 2007. The
survey report is available to interested parties for $400
from Buck’s Global Survey Resources, 500 Plaza Drive,
Secaucus, NJ, 07096-1533, or by calling 800-887-0509, or
by visiting
www.bucksurveys.com
.